ErinMcCarthy

The discount shoe retailer also raised both ends of its full-year per-share earnings guidance by five cents. It now expects per-share earnings between $1.50 and $1.65, on "flattish" same-store sales. Earlier this year it had expected a same-store sales decline in the low single digits.

In the most recent period, same-store sales edged up 0.8%, DSW said.

"In the quarter we accomplished our goal of achieving improvement in the underlying sales trends and eliminating any inventory imbalances," Chief Executive Mike MacDonald said in a release.

DSW has sought to expand its business by opening new stores as well as through deals. Earlier this year, it closed its $68.7 million acquisition of a 49.2% stake in Canada's Town Shoes Ltd., which operates about 180 locations.

For the quarter ended Aug. 2, DSW posted a profit of $34.3 million, or 38 cents a share, up slightly from $33.7 million, or 37 cents a share, a year earlier. Excluding luxury test sales and other items, earnings were 37 cents a share, down from 49 cents a share a year earlier.

Gross margin narrowed to 29.3% from 32.6%. The company's efforts to balance inventories placed pressure on margins, Mr. MacDonald said. However, inventories at the end of the quarter were current and below the prior year on a cost-per-square-foot basis, he added.

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